This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
In some cases the election to treat the contract as discharged is spoken of as rescission;1 or it is said that the contract is canceled,2 or terminated.3 In other jurisdictions the term "rescission" seems to be limited to the discharge of a contract by the subsequent agreement of the parties.4 In other jurisdictions rescission is distinguished from the election to treat the contract as discharged for the purpose of refusing further performance and of bringing an action to recover damages for breach of the contract 5 To rescind a contract is said to be "to put it at an end as if it had never been," as distinguished from treating "the contract as ended merely for purposes of further performance," holding "the wrongdoer liable for the damages sustained by reason of the repudiation."6 In this sense of the term, rescission is used as equivalent to the election to treat the contract as discharged so that it does not measure the rights of the parties, leaving one or both of the parties to their rights in quasi-contract.7 If the vendee elects to treat the default of the vendor as a discharge of the contract, and if the vendee then seeks to enforce a lien for the purchase price of realty, this is said not to be rescission, although the vendee treats the contract as discharged.8 If "rescission" is used in the sense of treating the contract as inoperative from the beginning, the act of the party who is not in default in bringing an action to recover damages for the breach thereof is said to show his election not to rescind.9
7 See Sec. 3037 et seq.
1 California. Ferguson v. Edgar, 178 Cal. 17, 171 Pac. 1061.
Massachusetts. Clark v. Gulesian, 197 Mass. 492, 84 N. E. 94.
Ohio. Seeds v. Simpson, 16 O. S. 321.
Oklahoma. Hart-Parr Co. v. Duncan, - Okla. -, 4 A. L. R. 1434, 181 Pac. 288. For a discussion of the meaning of "rescind," see Cavanagh v. Ridgefield, - N. J. -, 109 Atl 515.
2Harriman National Bank v. Sel-domridge, 249 U. S. 1, - L. ed. -.
3Garey v. Pasco, 89 Wash. 382, 154 Pac. 433.
4 Hochster v. De la Tour, 2 £1. & Bl. 678; McAllister Coman Co. v. Matthews, 167 Ala. 361, 140 Am. St. Rep. 43, 52 So. 416; Adams v. Guiraud, -Colo -, 169 Pac. 580; Elterman v. Hyman, 192 N Y. 113, 84 N. E. 937.
"Nothing is better settled than that one party to an executory contract, in the absence of fraud or a special reason, can not rescind. To rescind by agreement, the agreement must be mutual, and by all the necessary parties to the original contract. Such rescission must be with the clear knowledge and understanding of the parties. The same degree of proof of rescission will be required as in case of proof of the contract alleged to have been rescinded The burden to prove an agreement to rescind is upon the party alleging it" Adams v. Guiraud, - Colo -, 169 Pac. 580.
5 Clark v. Gulesian, 197 Mass. 492, 84 N. E 94; Elterman v. Hyman, 192 N. Y. 113, 84 N E. 937.
"The right of one party to a contract of sale to be excused from further performance where the other party has absolutely refused to perform is distinct from a right to rescind, as upon such refusal the innocent party has the right to recover damages for the injury suffered, but if rescission has taken place the contract then ceases to exist, and not even nominal damages can be recovered. Whiteside v. Brawley, 152 Mass. 133; Speirs v. Union Drop Forge Co.,
180 Mass. 87. For this reason when the vendor refused to perform, the defendants not only became entitled to recover such damages as had been caused by the breach, but were excused from further performance upon their part. Hapgood v. Shaw, 105 Mass. 276; National Machine & Tool Co. v. Standard Shoe Machinery Co.,
181 Mass. 275; United States v. Peck, 102 U. S. 64." Earnshaw v. Whitte-more, 194 Mass. 187, 80 N. E. 520.
7 Clark v. Gulesian, 197 Mass. 492, 84 N. E. 94; Elterman v. Hyman, 192 N. Y. 113, 84 N. E 937.
See ch. LXXXVIII.
8 Elterman v. Hyman, 192 N. Y. 113, 84 N. E. 937.
"It is insisted that the whole agreement is to be taken together and completely performed or wholly rescindeu, and that rescission by the vendee destroys the contract in toto and ab initio. The same argument was urged by counsel in Rose v. Watson (10 H L. Cas. 672), and the complete answer of Lord Westbury has already been quoted. None of the authorities relating to the lien of a vendee, and we have cited but few out of many, seem to regard the doctrine of rescission as at all applicable to the subject. This is not an action at law resting on rescission by which an election is made to declare the contract void in its inception, but a suit in equity resting on the equitable principle that the vendee by the contract and payment acquired an interest in the land. Res scission was neither alleged nor found and as the affirmance was unanimous we can not look into the evidence for further facts. The vendee does not elect to nullify the contract nor seek remission to his original rights when he asserts his acquired rights, depending wholly on the contract and his action thereunder, He recognizes the contract as a subsisting obligation, valid in its inception and still in force, and founds his entire claim for relief on the theory that because it is valid and he has made payments on it as required by it, he has become an owner of the land in equity to the extent of such payments. He accepts the situation which the wrongdoing of the other party has brought about,' and tries to get out of the land what he paid on it under the contract. The termination of a contract as to the future by one party owing to the default of the other is a rescission neither ab initio, nor in any true sense. Hurst v. Trow P. & B. Co., 2 Misc. Rep. 361, 366, 142 N. Y. 637. If it were, it would involve the surrender of possession taken pursuant to a provision authorizing it and the abandonment of all improvements made while in possession. The vendee does not rescind when without fault he goes into a court of equity and insists on a right springing from the contract and payment thereon pursuant to its terms. He does not repudiate the contract, but stands on it and affirms it as the foundation of the right he seeks to enforce, as fully as if he sought entire specific performance. He does not abandon his equitable ownership by trying to assert it in the only way that it can be asserted. The contract has been performed by him, wholly it may be, or in part, as in the case before us, and as, owing to the fault of the vendor, he can not have the full performance to which he is entitled, he asks for partial performance by the enforcement of the trust created by the contract and payment as provided thereby. He does not sue for money had and received, but to enforce a lien on land into which the money went. Nor does he rescind the contract, which is the source of his lien, by seeking to enforce it to the only extent now possible, owing to the breach by the vendor, but he demands that equity should give him the interest in the land that he acquired by the contract and payment. The denial of that right would be an encouragement to wrongdoing, and to hold that an attempt to foreclose the equitable lien is a rescission of the contract would deny the right in all cases, including those in which the vendee is in possession and has made improvements.'9 Elterman v. Hyman, 192 N. Y. 113, 84 N. E. 937. "Again it is urged that there can be no lien in the present case, under the authority of Ankeny v. Clark, 1 Wash. 649, 20 Pac 583, and Jones v. Grove, 76 Wash. 19, 135 Pac. 488, since it was held in these cases that, where a contract has been rescinded, it is at an end, and no rights exist under it. The contention assumes that, in the present case, there has been a rescission of the contract of purchase. But this is not the fact. On the contrary, the very suit is founded on the assumption of an existing contract and a breach thereof, which will result in a loss to the plaintiff if the relief she seeks is not granted. A rescission in the sense that each of the parties will be relieved from the obligations of the contract may be a part of the final decree, but it is plain that no rescission has as yet taken place." Ihrke v. Continental L. Ins. & Invest. Co., 91 Wash. 342, L. R. A. 1916F, 430, 157 Pac. 866.